Brazil has offered its ethanol technology to enable India to keep some of its sugar production off the global markets, and bring an end to the dispute at the World Trade Organisation (WTO) on the way each country deals with its production of the commodity, a senior official said.
Brazil is the biggest sugar exporter at around $11 billion in 2022 followed by India at around $5.7 billion. In the fiercely competitive global sugar market, both sides have challenged the other on the domestic supports they provide to their farmers which allegedly help them undercut each other.
The offer of ethanol technology has been made to help India utilise its excess sugar production and ease competition for Brazil in the international market, the official said.
In the 2022-23 sugar season that ended on September 30, of the total production of 373 lakh metric tonnes of sugar, 43 lakh metric tonnes or around 11% was diverted to ethanol production.
The government has discussed the Brazilian proposal with the industry and they are positive about it, he added.
Commerce Secretary Sunil Barthwal had visited Brazil from October 1 to October 4 for the 6th meeting of India-Brazil Trade Monitoring Mechanism where the cooperation on renewables and biofuels where further talks were held on the proposal.
The proposal for ethanol technology sits well with the Indian government’s aim to progressively increase the percentage of blending of ethanol in petroleum auto fuels and ease dependence on imported crude.
Bazil is a leader in ethanol-blended gasoline and has achieved 25% blending levels. Flex-fuel vehicles which can run on either gasoline or ethanol now have cornered a big market in Brazil accounting 83% of new light vehicle sales in 2022.
India aims to blend petrol with 20% ethanol by FY 26 from 12% now. It is also experimenting with blending diesel with ethanol. All global automakers have flex fuel engine vehicles as blending goes up these vehicle variants can make their way to the Indian market.
Apart from reducing the import bill of petroleum crude oil and helping in decarbonisation of transport, ethanol is being pushed by the Indian government to boost farm income.
According to some reports ethanol can boost income of sugarcane farmers by 15%. With farmers making additional money from ethanol, the pressure to increase the prices of sugar remains muted. It also adds to liquidity and profitability of sugarcane processors.
Both India and Brazil have been locked in multiple disputes at the WTO on sugar with the first complaint filed by India in 2005 when it challenged Brazil’s sugar subsidies. This round was won by India.
In 2019, Brazil challenged India’s support measures for sugarcane producers and export subsidies for sugar. Brazil claimed that these measures were inconsistent with the WTO’s Agreement on Agriculture (AoA).
In this complaint the ruling went against India and an appeal was filed. As the WTO’s Appellate Body is currently not functioning, to settle the matter Brazil has offered its ethanol.